The Department of Industrial Policy & Promotion (DIPP) has notified the National Manufacturing Policy (NMP) vide Press Note dated 4th November, 2011. The notified NMP inter alia propose to provide following direct tax incentive for skill development in manufacturing sector:

“To encourage the private sector to set up their own institutions, the government will provide weighted standard deduction of 150% of the expenditure (other than land or building) incurred on Public Private Partnership (PPP) project for skill development in the ITIs in manufacturing sector in separate facilities in coordination with NSDC.”

In order to incentivise companies to invest on skill development projects in the manufacturing sector, it is proposed to insert a new provision in the Income-tax Act to provide weighted deduction of 150% of expenses (not being expenditure in the nature of cost of any land or building) incurred on skill development project. The skill development project eligible for this weighted deduction shall be notified by the Board in accordance with the prescribed guidelines.

The proposed amendment will take effect from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013-14 and subsequent assessment years.

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